3. Determinants of aggregate demand Aa Aa The following graph shows a decrease i

Question

3. Determinants of aggregate demand Aa Aa The following graph shows a decrease in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the left from AD1 to AD2, causing the quantity of output demanded at a price level of 130 to fall from $400 billion to $200 billion. AGGREGATE PRICE LEVEL 170 160 150 140 AD1 120 110 AD2 100 90 0 100 200 300 400 500 600 700 800 REAL GDP [Billions of dollars] The following table lists several determinants of aggregate demand. Complete the table by indicating the change in each determinant necessary to decrease aggregate demand. Determinant Wealth Taxes Interest rates The value of the domestic currency relative to the foreign currency Change Needed to Decrease AD

Explanation / Answer

value of domestic currency relative to foreign currency rises,it implies appreciation.

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